Most dentists sell a dental practice once, or maybe twice, in their career. For many, it will be the largest financial transaction they will ever do and it will have a major impact on their financial wellbeing and that of their family. It can also be a very emotional process with the Principal selling something that they have built up over many years, often decades, and in many cases nurtured like a child. There will also be concerns about what will happen to staff and colleagues and how they will react to the sale.
As with many of life’s big steps, careful preparation can reduce the stress and increase the chance of success. This can take time and it is never too early to start to prepare. A good way to start is to ask yourself questions such as:
• Why do I want to sell? Be honest with yourself. Have you simply had enough of the administrative burdens of running a business but you still enjoy your clinical work? Is it so that you can spend more time pursuing other interests? Or is that you just want to live debt-free? These elements will impact on: the optimal timeline to a sale; the nature of the best buyer for you; and the structure of the deal which works for you.
• When do I want to retire? Most larger practices are now sold to dental corporates or groups and these will usually expect a tie-in period for a number of years. You, therefore, need to work back from your retirement date including this tie-in period, and the time to do the transaction, to decide when to start engaging in the sale process.
• What is important to me in a buyer? Not all dental practice buyers are the same. There are very significant differences between the dental corporates and groups. Some will brand your practice with their logos (some more obviously, some less). Do you want your patients to know that you are now part of a commercial behemoth? Some will give your Associates clinical freedom, others will be more prescriptive on the materials and labs that they can use. Some are large, others smaller and more personal. Most corporates are owned by Private Equity companies (mostly non-UK based) with a clock ticking to their next sale of the company; others are privately owned. Do your research; speak to friends and colleagues who have sold to different groups and find out what they are really like. The fact that Gensmile is owned only by its two founders and senior managers gives us the ability to focus on what we believe is right for our business and practices in the long-term.
• Are there things that I can do to improve the profitability of the business before sale? Could you bring in a new dentist to that underused surgery? When was the last time you benchmarked your prices to the other local dental practices? Why refer out all your implant work? If you give yourself enough time to prove that these measures have increased profitability then you will be able to sell for more.
• Can I manage this process myself or would I benefit from help? Agents charge a fee (it doesn’t matter whether you or the buyer pays this, the impact on what you have after the transaction is likely to be the same, as the buyer will include this in their financial analysis) which you could avoid by managing the process yourself but you may find that this is justified by them sharing the workload of organisation and by potentially getting a higher price. They probably know of buyers that you have never heard of and can help you understand what they have seen of the behaviour of the different groups. You would probably always hire an estate agent to sell your house and selling a practice is a lot more complex. Selecting a solicitor who understands dentistry is also important. If your accountant hasn’t done this kind of deal before, then make sure they have plenty of time to prepare or this can really slow things down.
• How well organised is my information? Whoever the buyer is, they will need to carry out due diligence, often to satisfy their bank as well as themselves. This can be painful but is greatly helped if all your files and information are up-to-date and well organised.
• What is my practice worth? The agent (if you hire one) and/or your accountant should work with you to prepare a profit & loss account which shows what the profit of the business will be in the hands of a dental group buyer. This will define the profit in terms of EBITDA (earnings before interest, tax, depreciation and amortisation), which is used as it is the profit-measure which is closest to the cash generated by the business. Buyers will usually apply a multiple to this to determine the price they are willing to pay.
Selling your dental practice can seem like a daunting prospect but with the right preparation you can reduce the pain and increase the change of success. With ‘success’ defined as getting the best price, on the best terms, from a buyer who you are happy with not only on the day the deal closes but over the years that follow.
Gensmile is a group of over 25, high-quality, predominately private dental practices. The founding ethos of Gensmile is to partner with dental practitioners who seek to be freed of the demands of running a business and instead want to be able to focus on delivering high quality dentistry to their patients. We aim to be the natural home for top quality private practices.
While we are small, we have a full team to support each of our practices from compliance to marketing.
We believe that every practice is unique and we aim to retain the culture and legacy of each one. Our patients don’t see any change after we take over but we work and invest to support and grow the practice in-line with its historical practice.
We are fully owned by Gensmile’s founders and management team. With no private equity owner, we can take a truly long-term approach, rather than being focused on a short-term exit.
Our aim is that each of our dental practices is a place where dental professionals want to build their careers and where patients receive a best-in-class experience with excellent clinical outcomes.
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